Federal Court of Appeals Quashes Fines on Consultancies for Private Inflation Estimates

On May 13, 2013, it was informed that tribunals I, II, III, and IV of the Federal Court of Appeals on Administrative Law Matters (the “Court of Appeals”) rendered judgments which quashed fines of AR$ 500,000 imposed on private consultancies that produced reports on retail prices’ variation which differed from the indexes published by the Government Statistics Agency (the “INDEC”).(1)

The penalties were imposed by the National Direction of Domestic Trade (the “DNCI”, after its Spanish acronym), a dependency of the Secretariat of Domestic Trade, based on provisions of the Fair Trade Law No. 22,802 (the “Fair Trade Law”). Now the Court of Appeals has held that the provisions invoked by the DNCI were not applicable to the facts of these cases, and consequently the fines were revoked. The rulings of the Court of Appeals are not final yet.

Marval, O’Farrell & Mairal participated in the case advising and representing Fundación de Investigaciones Económicas Latinoamericanas (FIEL), a prestigious think-tank that conducts research on social and economic matters. Marval acted both in the proceedings conducted before the administrative authorities and in the ensuing litigation in connection with the fine imposed to FIEL.

I. Background

In the first months of 2011, the DNCI began to make formal requests for information and then initiated proceedings against a number of private consultancies that produced reports on retail prices’ variation differing from the indexes published by the INDEC, and that were made public by the press.

These proceedings were grounded on the allegation that the reports produced by the private consultancies were inaccurate and, as a result of that, they misled consumers on the price of goods and services.

After an expedited administrative proceeding and without admitting any evidence other than reports of the INDEC on the accuracy of the methodology followed by these consultancies, the DNCI considered that the consultancies had violated the Fair Trade Law and imposed on each of them the maximum penalty of fine provided in the law: AR$ 500,000 (around USD 125,000 at that time).

Most of the penalties were based on the alleged violation of section 9 of the Fair Trade Law.(2) The other penalties were based on the alleged reluctance to provide the information required by the DNCI by invoking section 14, subsection c) of the Fair Trade Law. All these penalties were appealed to the Court of Appeals.(3)

II. The Rulings of the Court of Appeals

In six of the rulings rendered by the Court of Appeals(4) it was concluded that the provisions of the Fair Trade Law invoked by the DNCI were not applicable to the activities of the consultancies that gave rise to the commencement of these proceedings.

In these judgments, the Court of Appeals took into consideration precedents of the Federal Supreme Court and its own case law according to which the purpose of the Fair Trade Law is to preserve good faith in commercial activities and to protect the right of consumers to accurate information, in order to avoid being misled or deceived when acquiring products or goods, or contracting services.

Hence, it was pointed out that the advertising activity regulated by the Fair Trade Law is conducted with the purpose of fostering the consumption of certain goods and services. This advertising activity is defined as the activity aimed at drawing the attention and willingness of potential consumers of goods or services, who will decide whether to acquire them under the influence of the ads which show the features, price, and other marketing conditions of the products.

In this understanding, it was considered that the activity of the consultancies, which consisted of producing reports on the variation of prices and let them be known, did not fall within the scope of these provisions of the Fair Trade Law, since this activity:

1. Does not have the purpose of stimulating, promoting or deviating the use, demand or acquisition of certain goods or services, nor to influence the opinion of consumers in respect to the characteristics of those goods or services; and
2. Is not carried out with the purpose of providing information on the characteristics of the services provided by the consultancies, nor to attract a greater number of clients.

In these rulings it was explained that the activity of the consultancies consisted of gathering data on products and services marketed by third parties and in processing this data according to the consultancies’ criteria, in order to produce the reports required by sponsors or clients.

In light of these reasons, the Court of Appeals concluded that the fact that these reports were made public does not involve a “consumer relation”, nor does it constitute “presentations”, “commercial advertising”, or “propaganda” within the terms of the Fair Trade Law. Instead, these reports involve public and technical information that may not mislead or create confusion in consumers or interested parties with respect to the characteristics or marketing conditions of certain goods or services.

On these grounds, these six judgments ordered the revocation of the fines imposed. Taking into account the grounds on which these cases were decided, the Court of Appeals did not consider it necessary to analyze other arguments advanced by the consultancies, especially regarding the violation of the constitutional rights to free speech and due process.

In the remaining judgment,(5) the penalty imposed by the DNCI was declared null and void because it was contrary to the facts of the case. The fine was imposed on the alleged basis that the consultancy involved had not complied with a request of information when, in fact, the file showed that it had done so.

III. Preliminary Analysis

The rulings of the Court of Appeals are fully consistent with prior case law and scholars’ opinions in relation to the scope and purpose of the provisions of the Fair Trade Law analyzed in these cases. These provisions are not aimed at regulating or restricting activities that involve in essence the issuance of estimates and opinions on matters of public interest.